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Indonesia Auto Finance Market: Navigating Growth with 4.10% CAGR Amidst Economic Shifts and Digital Advancements
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Indonesia Auto Finance Market Size and Forecast (2019-2029)
https://www.makreo.com/report/indonesia-auto-finance-market-size-and-forecast-2019-2029
► Effect of Central Bank Interest Rate Hike on Indonesian Auto Financing Market
The auto finance sector in Indonesia, encompassing credit provided by banks, non-banking financial companies (NBFCs), and captive finance firms for both new and used cars, faced significant challenges in 2020 due to the global COVID-19 pandemic. This led to a notable decline in market growth.
In April 2024, the Indonesian Central Bank raised the benchmark BI Rate by 25 basis points to 6.25%. This adjustment aims to stabilize the rupiah amid rising risk aversion and delays in anticipated U.S. policy changes, impacting the auto finance market.
► Impact of Interest Rate Increases
The recent interest rate hike is expected to increase borrowing costs for consumers, potentially deterring buyers or reducing their purchasing power, particularly those reliant on financing. Both new and used car sales may be affected as a result.
► Digital Growth Trends in the Indonesia Auto Finance Market: Future Outlook
Digital advancements are set to drive significant growth in the Indonesia Auto Finance Market, particularly in the used car sector. Modern digital platforms now offer remote buying experiences, allowing consumers to explore a wide array of pre-owned vehicles online. This trend is anticipated to enhance market growth by providing greater convenience, choice, and value.
Additionally, the rise of non-banking finance companies offering competitive interest rates and flexible installment plans is fueling market expansion. Online personal loan aggregators like BSP Pay and Peso Pay, along with advancements in AI and ML, are enhancing the auto financing experience and driving future growth.
► Economic Resilience and Market Implications
The Indonesian economy showed resilience in 2023, with a GDP growth rate of 5%, as compared to 5.3% in 2022 and 3.7% in 2021. The World Bank forecasts a slight easing in GDP growth, averaging 4.9% from 2024 to 2026.
Economic growth fosters increased consumer confidence and purchasing power and with people feeling more financially secure, they may be more inclined to invest in purchasing vehicles, both new and used, leveraging auto financing options to facilitate these purchases. Consequently, the stability and growth of the Indonesian economy play a pivotal role in driving the expansion of the auto financing market.
► Challenges Facing the Indonesia Auto Finance Market
The Indonesia Auto Finance Market faces several critical challenges. Cybersecurity threats are a major concern as digital platforms become more prevalent, necessitating robust measures to protect sensitive customer data and secure online transactions.
Another challenge is the gap in financial literacy among consumers. Enhanced education regarding loan terms, responsible borrowing practices, and associated risks is crucial for empowering consumers to make informed decisions and effectively manage their auto financing options. The competitive landscape can also lead to unsustainable business practices, impacting profit margins and market stability. High interest rates and limited access to formal financing further exacerbate the situation, particularly for lower-income groups.
► Recent Developments in Indonesia's Auto Finance Sector
• The Otoritas Jasa Keuangan (OJK), Indonesia's financial services authority, has initiated new regulations effective from January 1, 2024. These regulations target online lenders in Indonesia, aiming to curb excessive interest rates and fees.
• As interest rates climb, the cost of borrowing escalates for consumers. This uptick in borrowing costs has the potential to dissuade certain buyers from participating in the auto financing market or diminish their purchasing capacity, particularly among those reliant on financing to procure vehicles.
• In February 2023, sharia loans in Indonesia returned to pre-pandemic levels, amounting to IDR 19,460 billion. Reflecting the acceptance and potential for further development in sharia-compliant financial products and services.
• Hyundai Capital Services Inc., part of the Hyundai Motor Group, teamed up with Shinhan Bank and Sinar Mas Group in 2023 to enter Indonesia's credit finance market.
► Scope of the Study
Makreo Research has released a comprehensive report titled "Indonesia Auto Finance Market Size and Forecast (2019-2029): Analysis by Vehicle Ownership, Type of Vehicle, Lender Type, Geography, Credit Interest, and Mode of Finance." This detailed analysis provides an extensive overview of the market, addressing trade dynamics, including import and export trends, and examining demand and supply factors.
The report evaluates historical and current market performance, focusing on interest rate trends, prevalent financing options, and regional variations in auto financing preferences. It also highlights major market participants, offering insights into mergers, acquisitions, funding sources, and corporate profiles.
Additionally, the study assesses the competitive landscape, providing valuable information on established companies and their financial activities. This thorough analysis equips stakeholders and industry experts with a robust understanding of the Indonesia Auto Finance Market's evolving dynamics and prospects.
►Period of Study
2019 - 2023: Past and Present Scenario
2023: Base year of study
2024 - 2029: Future Outlook of the Industry
►Key Areas Discussed in the Report
• Vehicle Ownership
• New Car
• Used Car
• Other Finance
Type of Vehicle
• Passenger Cars
• Commercial Cars
Type of Lender
• Banks
• NBFCs
• Captives
Regions
• Jabodetabek
• Yogyakarta
• Surabaya
• North Sumatra
• Other Regions
Credit Interest
• State
• Regional
• Government
Price and Age Group
Mode of Finance
• Cash
• Credit
Companies Covered
• PTA Toyota Astra Financial Services
• PT BFI Finance
• JACCS MPM Finance
• PT Suzuki Finance
• Dipo Star Finance
• OTO Multiartha
• Mandiri Tunas Finance
• BCA Finance
• Radana Bhaskara Finance
• PT Adira Dinamika Multi Finance
• PT Indomobil Multi Jasa Tbk
• PT KDB Tifa Finance Tbk
• PT Batavia Prosperindo Trans Tbk
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Makreo Research, a dynamic full-service research and consulting firm located in Mumbai, is dedicated to reshaping the research landscape and delivering comprehensive solutions to intricate business challenges.
Our mission is to streamline the ever-changing economic landscape and intricate market dynamics, leveraging brilliant minds and cutting-edge technology to make a substantial difference in the realm of business and decision-making.
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